Enforcing due dates with late fees, interest, etc

We're about to start enforcing late fees for our community and I want to know what all of you do as far as late fees are concerned. My idea is to charge 19.2% of their unpaid balance as it stands on the date that their payment is late. Here's how it would work:

Member pays on time January, February, and March. They've paid $390 for the year so far. However, they miss April, so they are now in arrears by $130. Therefore, we will assess them a 19.2% ($25) fee which is taken off their paid balance of $390, taking the total paid down to $365. This means they are now in arrears by $155. Now let's say they skip April entirely and just pay $130 for May. They are still behind by $155, so we take 19.2% of that and bill them $154.96. If they fail to pay that by the next cycle, they'll owe $184.72 and then $220.18 and etc etc etc.

I like it. What do you think?

Look at how banks do collections and use that as a guide. Interest is usualy under 8% but that is added onto the total of late fees and dues owed when liened or foreclosure. Our late fees were a fixed $20 and charged after the 15th of the month. Our dues were only $50 a month. That is about the rate of bad check fees.

Plus you need a fixed time line. We have a 6 month lien policy and a 1 year CONSIDER foreclosure. A fixed time helps than just deciding when you do not like the situation.

worth checking whether your CCRs/ condo by-laws whatever plus state interest limits, allow usury. Do your bylaws contemplate interest level like this ?

Just a rough calculation without financial skills, suggests that just an unpaid single month's $100 arrear would attract - after 12 end of period monthly compoundings at 19.2 % - an additional $1,561.19 in monthly compounded interest for a total unpaid balance of $1,661.19 at end of the 12th monthly compounding period.

Thus, unless my unskilled math is wrong, this would indicate an annual interest rate of 1561 %

Not sure if you folks have an Interest Act, but annual interest up here is limited at 60 %, above which deemed unenforceable usury offence.

Wonder how a judge would like hearing : " Well your honour we are seeking from the defaulting homeowener monthly compounded interest that accrues /is expressed annually at 1,561 % per annum !"

Ron,

First and foremost, see if your governing documents gives the Association the authority to charge a late fee. If not, the Board could be exceeding the authority they have and would lose any legal challenge to late fees.

Typically, late charges are authorized by language contained in the CC&Rs and/or applicable State laws.

Our CC&Rs authorize 10% of the assessment (which is a pain in the butt, speaking as treasurer).

Most of the Associations I have seen simply charge a flat fee, normally around 20-25 dollars per month.

Thanks for the replies, all. A blanket response to those asking about our governing docs:

Our documents say nothing about late fees. I actually converted our paper documents to a text-based PDF and did text separate searches for "late" and "fee" and found nothing relevant. However, the Ohio Revised Code states that associations have the right to charge late fees, but it doesn't specify a particular limit. Perhaps this limit inherits from something else?

is there a judge in North America who will confirm an "interest-based" late fee of 1561 % per annum ?

so - if hearing a defence of illegal usury at the proposed rate - an Ohio judge would be asked to uphold a buckshee interest surcharge of 1,553 % ? (? to throw that against the wall to see if it sticks ?).